Export Subsidies (Large Country) (10pts) 1. Assume Brazil produces sugar 2. Assume the world price under free trade is $0.25 per kilo. A government...
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Export Subsidies (Large Country) (10pts)


1. Assume Brazil produces

sugar

2. Assume the world price under free trade is $0.25 per kilo.

4. A government export subsidy is put in effect of $0.15 per kilo exported.

3. Before the subsidy, the country consumes 145,000,000 kilo per year. It produces 180,000,000 Kilo 5. After the subsidy, domestic production grows to 245,000,000 kilos and domestic consumption falls to 115,000,000 kilos

6. The world price of Sugar falls to 0.20 per kilo.


What is the gain to producers?


What is the consumption effect?


What is the consumer loss?


What is the net national loss?

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